Paul Giorgio: We Have Too Many Not-for-Profits

A story in the Worcester Telegram & Gazette caught my eye last week. It was about a report that State Auditor Suzanne Bump released on the problems at the now defunct Henry Lee Willis Center, a Worcester not-for-profit. The report criticized and pointed out mismanagement at the agency. Among the findings were that the agency leased an Audi A6 Quartro, did not pay $250,000 in unemployment taxes, 60% of their programs lost money and that they paid $10,000 to a PR firm when the state started to investigate them.

Nonprofit vs. for-profit

This story got me thinking about nonprofits. For example why do we have them and why are there so many? Can a for-profit be as effective in helping the poor? The difference between a for-profit and a not-for-profit is that in a for-profit the money goes back to the owners or stockholders. In a not-for-profit they spend it on themselves.

College Presidents for example, are highly compensated. Joseph Aoun, the president of Northeastern University, received $3.1 million in salary, the Tufts University president received $2.2 million and WPI’s Dennis Berkey received close to a million dollars.

But is doesn’t stop there. The reason our healthcare costs are so high is that the former president of Blue Cross/Blue Shield, Clive Killingsworth was given an $11 Million severance. BC/BC was paying their volunteer board members $50,000 a year. Locally, the president of SMOC makes $400,000 while the president of Community Healthlink is earning $300,000. Even the national president of Boys & Girls Inc is in on the feeding frenzy pulling in a cool $900,000.

This is not about executive compensation, because a great many of these agencies are big business and you need competent CEOs to run them. No this is about equity and tax fairness.

Good intentions gone bad

How did we get here? Well the Department of the Treasury exempted nonprofits from paying taxes in 1863 and in 1894; the government established the tax deduction for charitable giving.

Worcester, Boston and Cambridge have particular problems because of the number of colleges and healthcare facilities we have. In a recent report, Worcester had 21% of its property owned by not-for-profits. This means that the burden is shifted to the homeowners. This is untenable at best.

We are trying to bring equity to the real estate tax structure and we constantly pit homeowners against business owners. This is not the fight we should be having. We need to start talking about doing away with the tax exempt status of certain big businesses. Nonprofits today are big business. We are not talking about the local food pantry anymore.

Why is the corner store or small restaurant paying property taxes, sales tax and income tax, when Worcester Sate College or Clark University does not? Why is Community Healthlink and SMOC who own literally about 100 group homes in the city not paying taxes but they can pay their CEO almost a half million dollars a year.

We need to get a handle on this problem now, while it may still be manageable. PILOTs (Payment in lieu of Taxes) are good, but they are not good enough.

The nonprofit community is full of committed and caring people. The tax status of their employer should not affect their commitment to working with the poor or the sick or those who need a hand up.

But the employees of Hanover Insurance also do a great deal for the city, as do the employees of St. Gobain and Polar Soda, all for profits.

What we are facing is the results of good intentions gone bad. When the law was first enacted 150 years ago, we were a much different society. You did not have the thousands of not for profits that you have today. Families took care of each other and towns took care of those without families.

I am all for charity, but sometimes charity begins at home. Maybe I will start a not for profit called, “Say no to non-profits.”

Paul Giorgio is a longtime Democratic Party Activist who has worked on numerous campaigns. He was a Lead Advance Person for President Clinton & Vice President Gore. He was Deputy Director of Special Events for President Clinton’s first Inauguration. He has been elected a delegate to numerous Democratic National Conventions and recently served as one of President Obama’s representatives on the Platform Committee. In 2013 he was chosen as a Presidential Elector. He is the President of Pagio, Inc., publishers of Pulse Magazine, Vitality Magazine and Worcester Medicine.

Here are the total annual compensation amounts for the CEOs of the four non-profit hospital groups in Central Massachusetts. The source is each hospital group’s latest available 990 Return of Organization Exempt from Income Tax, which is filed with the IRS and available at Guidestar.org. The CEOs are shown here, from lowest to highest total compensation.

#4 Winfield Brown

Salary: $192,828

Note: Henry Heywood Memorial Hospital and Athol Memorial Hospital merged in January 2013 to form Heywood Health Care. Brown, who had been president and CEO of Athol Memorial, became head of Heywood Health Care in August 2011. Daniel Moen, who had been president and CEO of Henry Heywood Memorial, was terminated in January 2011. His total compensation for fiscal 2011 was $993,456.

#1 John O'Brien

Salary: $2,358,455

Note: John O’Brien retired as president and CEO in January 2013. Dr. Eric Dickson, MD, became the new president and CEO the following month. The UMass Memorial news release announcing Dickson’s appointment did not include his compensation package. According to UMass Memorial’s latest available 1099 form, Dickson received a total of $650,589 in compensation during the fiscal year that ended September 30, 2012.